Could the rise of QSR innovation spell the end of fast-food franchises?

As leading quick service restaurant brands take a more direct and active innovation role, they are increasingly building and incubating new companies from within that they can take directly to market instead of relying on external funding sources such as franchise owners. 

This gives QSRs incredible control and allows them to tap existing market power for faster, more meaningful results with lower risk. With bespoke robotics solutions playing a growing role in the future of fast-food, we’re already entering an era where restaurant locations may soon consist mostly of robotics and intelligent automation. 

But if QSRs no longer need to worry about the massive upfront capital costs related to real estate, equipment and human labor, where does that leave the franchise model that has been built up over decades?

Despite the battering restaurants initially endured during the pandemic, the QSR market is rapidly recovering and is expected to grow from a market size of $295.91 billion in 2019 to $296.55 billion this year, after dipping to $256.03 billion in 2020.

This astonishing industry turnaround has been led by some of the world’s top QSRs, including McDonald’s, Starbucks, Taco Bell and Subway. As quarantines and lockdowns limited in-store foot traffic and contributed to a labor shortage, leading QSRs turned to innovations such as contactless payments, home delivery and intelligent automation solutions to fuel growth.

But not all QSRs are created equal, and the rapid pace of innovation amid COVID-19 has begun to upend the franchise model. Historically, franchising has worked for restaurant chains because it decentralizes the development paradigm and facilitates fast unit expansion. It also offsets the risk of real estate, construction, equipment, staffing and operations from QSR to franchisee. 

Today, however, it is the brands and not the franchisees that are driving innovation in key areas like equipment, staffing and operations through new developments such as artificial intelligence and robotics. As the notion of a fast-food experience changes to one that is driven by machines instead of people, the risks change – fundamentally altering the relationship between the brand and the franchisee. 

Soon, fast food locations could command very different expectations in terms of real estate, equipment, staffing and operations investments. Imagine a QSR with a fully automated solution requiring just a sliver of the current footprint and occasional visits from employees to restock ingredients and maintain the automated machinery. 

That’s a very different-looking world for franchises, and one they are increasingly going to need to embrace as the technology improves at a rapid pace. When paired with a robust technology platform, products like the new Flippy 2 and Sippy from Miso Robotics are examples that are pointing the way toward this future sooner than many realize.

And while this future does not spell the end of the franchise model, it almost certainly will catalyze immense changes in how franchisees consider and adopt digital transformation efforts – and their related costs – in partnership with QSRs.

To make this enduring partnership between brands and franchises flourish, it’s time for brand leaders to establish a strategy to build trust and transparency to ensure that franchisees can become advocates in the larger digital transformation goals. What do you think about the future of the franchise model in the face of exploding QSR digital innovations?